Abstract

http://ssrn.com/abstract=1809689
 
 

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Anti-Takeover Provisions as a Source of Innovation and Value Creation


Mark Humphery-Jenner


UNSW Australia - UNSW Business School; Financial Research Network (FIRN)

March 18, 2011

European Banking Center Discussion Paper No. 2011-009
CentER Discussion Paper Series No. 2011-45

Abstract:     
Managers are risk averse. Excessive risk-aversion can destroy share-holder wealth. A key source of risk is the threat of an opportunistic takeover designed to take advantage of depressed market prices. This is especially the case in innovative or hard-to-value ('HtV') companies whose price may be depressed due to valuation difficulties rather than managerial under-performance. For these HtV firms, the threat of an opportunistic takeover can destroy value by inducing agency conflicts of managerial risk aversion. Managers and regulators argue that ATPs can ameliorate this problem. This article presents a theoretical model and empirical results that show that for HtV firms, ATPs encourage managers to make value-creating takeovers and increase innovation and do not induce agency conflicts of managerial entrenchment. This implies that for innovative or hard-to-value firms, ATPs can ameliorate managerial risk aversion and encourage value-creation.

Number of Pages in PDF File: 71

Keywords: Takeovers, Acquisitions, Valuation, Governance, Managerial Risk Aversion, Innovation

JEL Classification: G34, O31, O32

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Date posted: April 19, 2011  

Suggested Citation

Humphery-Jenner, Mark, Anti-Takeover Provisions as a Source of Innovation and Value Creation (March 18, 2011). European Banking Center Discussion Paper No. 2011-009; CentER Discussion Paper Series No. 2011-45. Available at SSRN: http://ssrn.com/abstract=1809689 or http://dx.doi.org/10.2139/ssrn.1809689

Contact Information

Mark Humphery-Jenner (Contact Author)
UNSW Australia - UNSW Business School ( email )
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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